Lord Monson: Perhaps I may enlarge upon what the Minister said. The Channel Islands' money laundering legislation is stricter than ours at present. For instance, you have to produce a passport before you can open a bank account, which is not the case in this country. Their legislation is even better than the noble Lord, Lord Bassam, suggested.

Lord Renton: I have held responsibilities for the Channel Islands and the Isle of Man, as have the two noble Lords. It is clearly within my recollection that the Isle of Man never suffered throughout World War One and World War Two; we had no difficulty in defending it from German intrusion. But the Channel Islands have always been very vulnerable to foreign intrusion of one kind or another. I am not thinking merely of defence against aggression, but, as has been mentioned, various forms of financial intrusion can be easily made. In the context of the Bill and what it attempts to achieve, I hope that the Government will remain alert to the vulnerability of the Channel Islands.

3 Feb 2003 : Column GC46

I do not suggest that we should press for the amendment, but I am glad that it has been brought forward. I hope that the various powers to step in on behalf of the Crown, which have always existed, will be maintained and never overlooked.

Lord Wallace of Saltaire: While I am sympathetic to the experience of the Channel Islands during the Second World War, it should be remembered that in the 1950s and the 1960s they had economies based on potatoes, tomatoes and tourism. Since the 1970s, and increasingly in the past 15 years, they have developed extraordinarily successful financial services institutions and are now among the biggest off-shore financial centres in the world.

That development has transformed the social mix and nature of the Channel Islands and their position in European finance and European life. I find it rather puzzling that the relationship between the British Crown and the Channel Islands is still governed by the agreement of 1204. External relations have changed somewhat in the intervening 800 years and, as EU legislation and the characteristics of financial markets increasingly become integrated, a number of questions need to be raised.

The Channel Islands now have a very privileged position. They are able to choose which aspects of international legislation they opt into and which aspects they opt out of. I understand that they are not part of the United Kingdom, but it is the Home Office and not the Foreign Office which handles their affairs.

Lord Bassam of Brighton: That responsibility was transferred to the Lord Chancellor's Department.

Lord Wallace of Saltaire: I apologise. I should have remembered that it is now the responsibility of the Lord Chancellor's Department.

The advice that Her Majesty's Government give to the Crown on how to handle the Crown dependencies is up to them. It will be based on negotiations, but not necessarily negotiations between equals.

I am surprised that there have not been any consultations on the extent of the Bill. As Schengen moves further forward, the whole question of how far the Crown dependenciesparticularly the Channel Islandsshould be included within its broad scope is a matter to which we shall need to return. We should like to consult further. We shall withdraw the amendment at this stage but we may wish to return to it on Report as a result of further conversations we may have between now and then. I beg leave to withdraw the amendment.